REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is entered into as of
this 27th day of April, 1999 by and among VarsityBooks.com Inc., a Delaware
corporation (the "Company"), with principal offices located at 1050 Thomas
Jefferson Street, N.W., Washington, D.C. 20007, and Campus Pipeline, Inc., a
Utah corporation (the "Investor), with principal offices located at 1111
Brickyard Road, Suite 102, Salt Lake City, Utah 84103.
RECITALS:
WHEREAS, the Company and the Investor are parties to a Provider Agreement
dated as of April 27, 1999 (the "Provider Agreement");
WHEREAS, pursuant to the Provider Agreement, the Company has agreed to
issue and sell to Pipeline one warrant to purchase up to 50,000 share of the
Company's Common Stock, par value $.001 per share ("Common Stock") at an
exercise price of $3.00 per share and a second warrant to purchase up to 100,000
shares of Common Stock at $3.00 per share (collectively, the "Pipeline
Warrants"); and
WHEREAS, it is a condition of the Provider Agreement that the Company enter
into an agreement with Pipeline pursuant to which the Company will grant
Pipeline certain rights to register the shares of Common Stock issuable upon
exercise of the Pipeline Warrants.
NOW, THEREFORE, in consideration of the mutual covenants set forth herein
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the Company and the Investor hereby agree as follows:
1. CERTAIN DEFINITIONS.
The following terms shall have the following respective meanings:
"Commission" shall mean the Securities and Exchange Commission or any
other federal agency at the time administering the Securities Act.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any similar federal statute and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
"Holder" shall mean (a) the Investor so long as it holds any
Registrable Securities and any person holding Registrable Securities to whom the
Investor transfers the rights under this Agreement in accordance with Section 8
of this Agreement and (b) all "Holders" as defined in the Investors' Rights
Agreement.
"Investors' Rights Agreement" shall mean the Amended and Restated
Investors' Rights Agreement dated as of February 25, 1999, with Baker & Taylor,
Inc. ("B&T"), the holders of the Series A Preferred Stock, par value $.001 per
share ("Series A Preferred Stock"), and the
holders of Series B Preferred Stock, par value $.001 per share ("Series B
Preferred Stock").
"Register", "registered" and "registration" shall refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement.
"Registration Expenses" shall mean all expenses incurred by the
Company in the performance of or compliance with this Agreement, including,
without limitation, all registration, qualification and filing fees, printing
expenses, escrow fees, fees and disbursements of counsel for the Company, blue
sky fees and expense, and the expense of all special audits incident to or
required by any such registration (but excluding the compensation of regular
employees of the Company which shall be paid in any event by the Company).
"Registrable Securities" shall mean: (a) the Shares; (b) any other
securities issued or issuable with respect to the Shares upon any stock split,
stock dividend, recapitalization, or similar event or any Common Stock otherwise
issued or issuable with respect to the Shares; and (c) any "Registrable
Securities" as the term shall be defined in the Investors Rights' Agreement
(prior to giving effect to the Waiver and Consent, dated the date of this
Agreement, executed by certain holders of the Series A Preferred Stock, the
Series B Preferred Stock and Common Stock); provided, that shares of Common
Stock or other securities shall only be treated as Registrable Securities if and
so long as they have not been (i) sold to or through a broker or dealer or
underwriter in a public distribution or a public securities transaction, or (ii)
sold in a transaction exempt from the registration and prospectus delivery
requirements to the Securities Act so that all transfer restrictions and
restrictive legends with respect thereto are removed upon the consummation of
such sale.
"Rule 144" means Rule 144 promulgated under the Securities Act.
"Rule 145" means Rule 145 promulgated under the Securities Act.
"Securities Act" shall mean the Securities Act of 1933, as amended,
or any similar federal statute and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Selling Expenses" shall mean all underwriting discounts, selling
commissions and stock transfer taxes applicable to the securities registered by
the Holder and all fees and disbursements of counsel for the Holder.
"Selling Expenses" shall mean all underwriting discounts, selling
commissions and stock transfer taxes applicable to the securities registered by
the Holder and all fees and disbursements of counsel for the Holder.
"Shares" shall mean the shares of Common Stock subscribed for and
purchased pursuant to the Pipeline Warrants.
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2. PIGGYBACK REGISTRATIONS.
(a) Notice of Registration. If at any time or from time to time,
the Company shall determine to register any of its securities, either for its
own account or the account of a security holder or holders other than (i) the
Company's Initial Public Offering (as defined in the Investors' Rights
Agreement), (ii) a registration relating solely to employee benefit plans, or
(iii) a registration relating solely to employee benefit plans, or (iii) a
registration relating solely to a transaction subject to Rule 145, the Company
will:
(i) include such registration (and any related qualification
under blue sky laws or other compliance), and in any underwriting involved
therein, all the Registrable Securities specified in a written request or
requests made within thirty (30) days after receipt of such written notice from
the Company by any Holder.
(b) Underwriting. If the registration of which the Company gives
notice is for a registered public offering involving an underwriting, the
Company shall so advise each Holder as a part of the written notice given
pursuant to Section 2(a). In such event, the right of the Holder to registration
pursuant to this Agreement shall be conditioned upon such Holder's participation
in such underwriting and the inclusion of Registrable Securities in the
underwriting to the extent provided herein. All Holders proposing to distribute
their securities through such underwriting shall (together with the Company and
the other holders distributing their securities through such underwriting) enter
into an underwriting agreement in customary form with the managing underwriter
selected for such underwriting by the Company. Notwithstanding any other
provision of this Agreement, if the managing underwriter determines that
marketing factors require a limitation of the number of shares to be
underwritten, the managing underwriter may limit the number of shares to be
underwritten, the managing underwriter may limit the number of Registrable
Securities to be included in the registration and underwriting, on a pro rata
basis based on the total number of securities (including, without limitation,
Registrable Securities) entitled to registration pursuant to any registration
rights granted by the Company at the time of the filing of the registration
statement; provided, however, that with respect to any public offering following
the Initial Public Offering, the number of shares allocated along all Holders of
Registrable Securities exercising their rights under this Agreement shall not be
less than thirty percent (30%) of the number of shares allocated to any Holder
or other holder to the nearest one hundred (100) shares. If any Holder
disapproves of the terms of any such underwriting, he or she may elect to
withdraw therefrom by written notice to the Company and the managing
underwriter. Any securities excluded or withdrawn from such underwriting shall
be withdrawn from such registration.
(c) Right to Terminate Registration. The Company shall have the
right to terminate or withdraw any registration initiated by it under this
Agreement prior to the effectiveness of such registration, whether or not any
Holder has elected to include securities in such registration.
3. EXPENSE OF REGISTRATION.
All Registration Expenses incurred in connection with the Company's
performance of or compliance with this Agreement shall be borne by the Company.
All Selling Expenses relating
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to securities registered on behalf of the Holder and all other registration
expenses incurred in connection with any registration pursuant to this Agreement
shall be borne by the Holders of the registered securities included in such
registration pro rata on the basis of the number of shares so registered.
4. REGISTRATION PROCEDURES.
In the case of each registration, qualification or compliance effected by
the Company pursuant to this Section 4, the Company will keep each Holder
advised in writing as to the initiation of each registration, qualification and
compliance and as to the completion thereof. At its expense the Company will:
(a) Prepare and file with the Commission a registration statement
with respect to such securities and use its best efforts to cause such
registration statement to become and remain effective for at least one hundred
eighty (180) days or until the distribution described in the registration
statement has been completed.
(b) Furnish to the Holders participating in such registration and
to the underwriters of the securities being registered such reasonable number of
copies of the registration statement, preliminary prospectus, final prospectus
and such other documents as such underwriters may reasonably request in order to
facilitate the public offering of such securities;
(c) Use its best efforts to register and qualify the securities
covered by the registration statement under such other securities or Blue Sky
laws of such jurisdictions as shall be reasonably requested by the Holders,
provided that the Company shall not be required in connection therewith or as a
condition thereto to qualify to do business or to file a general consent to
services of process in any such states or jurisdictions;
(d) In the event of any underwritten public offering, enter into
and perform all its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement; and
(e) Notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statement therein not misleading in light of the circumstances then existing.
5. INDEMNIFICATION.
(a) The Company will indemnify each Holder of Registrable
Securities included in a registration pursuant to this Agreement, each of its
officers, directors and partners, and each person controlling such Holder within
the meaning of Section 15 of the Securities Act, with respect to which
registration, qualification or compliance has been effected pursuant to this
Agreement, and each underwriter, if any, and each person who controls any
underwriter within
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the meaning of Section 15 of the Securities Act, against all expenses, claims,
losses, damages or liabilities (or actions in respect thereof), including any of
the foregoing incurred in settlement of any litigation commenced or threatened,
arising out of or based on any untrue statement (or alleged untrue statement) of
a material fact contained in any registration statement, prospectus, offering
circular or other document, or any amendment or supplement thereto, incident to
any such registration, qualification or compliance, or based on any omission (or
alleged omission) to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, or any violation by
the Company of the Securities Act, the Exchange Act, state securities laws or
any rule or regulation promulgated under such laws applicable to the Company in
connection with any such registration, qualification or compliance, and the
Company will reimburse each such Holder, each of its officers and directors, and
each person controlling such Holder, each such underwriter and each person who
controls any such underwriter, for any legal and any other expenses reasonably
incurred in connection with investigating, preparing or defending any such
claim, loss, damage, liability or action, as such expenses are incurred,
provided that the Company will not be liable in any such case to the extent that
any such claim, loss, damage, liability or expense arises out of or is based on
any untrue statement or omission or alleged untrue statement or omission, made
in reliance upon and in conformity with written information furnished to the
Company by an instrument duly executed by any Holder, controlling person or
underwriter and stated to be specifically for use therein.
(b) Each Holder, severally and not jointly, will, if Registrable
Securities held by such Holder are included in the securities as to which such
registration, qualification or compliance is being effected, indemnify the
Company, each of its directors and officers, each underwriter, if any, of the
Company's securities covered by such a registration statement, each person who
controls the Company or such underwriter within the meaning of Section 15 of the
Securities Act, and each other such Holder, each of its officers, director or
partners and each person controlling such Holder within the meaning of Section
15 of the Securities Act, against all claims, losses, damages and liabilities
(or actions in respect thereof) arising out of or based on any untrue statement
(or alleged untrue statement) of a material fact contained in any such
registration statement, prospectus, offering circular or other document, or any
omission (or alleged omission) to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
will reimburse the Company, such Holders, such directors, officers, partners,
persons, underwriters or control persons for any legal or any other expenses
reasonably incurred in connection with investigating or defending any such
claim, loss, damage, liability or action, as such expenses are incurred, in each
case to the extent, but only to the extent, that such untrue statement (or
alleged untrue statement) or omission (or alleged omission) is made in such
registration statement, prospectus, offering circular or other document in
reliance upon and in conformity with written information furnished to the
Company by an instrument duly executed by such Holder and stated to be
specifically for use therein Notwithstanding the foregoing, the liability of
each Holder under this Section 5(b) shall be limited to an amount equal to the
net proceeds of the shares sold by such Holder.
(c) Each party entitled to indemnification under this Section 5
(the "Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any
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such claim or any litigation resulting therefrom, provided that counsel for the
Indemnifying Party, who shall conduct the defense of such litigation shall be
approved by the Indemnified Party may participate in such defense at such
party's expense; provided, however, that an Indemnified Party (together with all
other Indemnified Parties which may be represented without conflict by one
counsel) shall have the right to retain one separate counsel, with the fees and
expense to be paid by the Indemnifying Party, if representation of such
Indemnified Party by the counsel retained by the Indemnifying Party would be
inappropriate due to actual or potential differing interests between such
Indemnified Party and any other party represented by such counsel in such
proceeding. The failure of any Indemnified Party to give notice as provided
herein shall not relieve the Indemnifying Party of its obligations under this
Section 5 unless the failure to give such notice is materially prejudicial to an
Indemnifying Party's ability to defend such action. No Indemnifying Party, in
the defense of any such claim or litigation, shall, except with the consent of
each Indemnified Party, consent to entry of any judgment or enter into any
settlement which does not include as an unconditional term thereof the giving by
the claimant or plaintiff to such Indemnified Party of a release from all
liability in respect to such claim or litigation.
6. INFORMATION BY HOLDER.
Each Holder of Registrable Securities included in any registration shall
furnish to the Company such information regarding such Holder, the Registrable
Securities held by them and the distribution proposed by such Holder as the
Company may request in writing and as shall be required in connection with any
registration, qualification or compliance referred to this Agreement.
7. RULE 144 REPORTING.
With a view to making available the benefits of certain rules and
regulations of the Commission which may at any time permit the sale of the
Restricted Securities to the public without registration, after such time as a
public market exists for the Common Stock of the Company, the Company agrees to
use its best efforts:
(a) Make and keep public information available, as those terms
are understood and defined in Rule 144, at all times after the effective date
that the Company becomes subject to the reporting requirements of the Securities
Act or the Exchange Act;
(b) File with the Commission in a timely manner all reports and
other documents required of the Company under the Securities Act and the
Exchange Act (at any time after it becomes subject to such reporting
requirements); and
(c) To furnish to each Holder forthwith upon request a written
statement by the Company as to its compliance with the reporting requirements of
said Rule 144 (at any time after ninety (90) days after the effective date of
the first registration statement filed by the Company for an offering of its
securities to the general public), and of the Securities Act and the Exchange
Act (at any time after it has become subject to such reporting requirements), a
copy of the most recent annual or quarterly report of the Company, and such
other reports and documents of the Company and other information in the
possession of or reasonably obtainable by the Company as
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an Investor may reasonably request in availing itself of any rule or regulation
of the Commission allowing an Investor to sell any such securities without
registration.
8. TRANSFER OF REGISTRATION RIGHTS.
The rights to cause the Company to register securities granted the Investor
under this Agreement may be assigned to a transferee or assignee reasonably
acceptable (unreasonable transferees or assignees would include, but not be
limited to, competitors or potential competitors of the Company as determined by
the Board of Directors prior to transfer) to the Company in connection with any
transfer or assignment of Registrable Securities by the Investor (together with
any affiliate); provided that: (a) such transfer may otherwise be effected in
accordance with applicable securities laws; (b) notice of such assignment is
given to the Company; (c) such transferee or assignee covenants to be bound by
the registration rights provisions in this Agreement; and (d) such transferee or
assignee: (i) is a wholly-owned subsidiary or constituent partner (including
limited partners, retired partners, spouses and ancestors, lineal descendants
and siblings of such partners or spouses who acquire Registrable Securities by
gift, will or intestate succession) of the Investor; or (ii) acquires form the
Investor at least fifty thousand (50,000) shares of Restricted Securities (as
appropriately adjusted for stock splits and the like).
9. STANDOFF AGREEMENT.
Each Holder holding more than one percent (1%) of the Company's Common
Stock on a fully-diluted basis agrees in connection with the Initial Public
Offering and the first public offering of the Company's securities thereafter
(other than a registration of securities in a transaction subject to Rule 145 or
with respect to an employee benefit plan) that, upon request of the Company or
the underwriters managing any underwritten offering of the Company's securities,
not to sell, many any short sale of, loan, grant any option for the purchase of,
or otherwise dispose of any Registrable Securities (other than those included
with the registration) without the prior written consent of the company or such
underwriters, as the case may be, for such period of time (not to exceed one
hundred eighty (180) days from the effective date of such registration) as may
be requested by the Company or such managing underwriters; provided, that: (a)
the officers and directors of the Company also agree to such restrictions; and
(b) the holders of the Company's securities with registration rights similar to
those granted by this Agreement also agree to, or are bound by, such
restrictions.
10. TERMINATION OF RIGHTS.
The rights of any particular Holder to cause the Company to register
securities under this Agreement shall terminate with respect to such Holder on
the fifth year anniversary of the effective date of the Company's Initial Public
Offering.
11. OTHER REGISTRATION RIGHTS.
The Company shall not grant any registration rights to any existing or
future holder of equity securities of the Company, or securities convertible
into Common Stock of the Company, which rights are more favorable than the
registration rights granted to the Investor; provided, that notwithstanding the
foregoing the Company may grant registration rights to existing or future
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holders of its equity securities on a pari passu basis with the Shares so long
as the grant of such rights affect the registration rights held by all holders
of Registrable Securities, including the holders of the Shares, equally.
12. MISCELLANEOUS.
(a) The parties are entering this Agreement as independent
contractors, and this Agreement will not be construed to create a partnership,
joint venture, franchise or employment relationship between them. Neither party
will represent itself to be an employee or agent of the other or enter into any
agreement on the other's behalf or in the other's name.
(b) Neither party will issue any press releases or make any other
public disclosures regarding this Agreement or its terms without the other
party's prior written consent or except as may be required by law in the opinion
of the party's counsel.
(c) Nothing in this Agreement, express or implied, is intended to
confer upon any party, other than the parties hereto, and their respective
successors and assigns, any rights, remedies a, obligations or liabilities under
or by reason of this Agreement, except as expressly provided herein.
(d) Except as otherwise provided herein,, the provisions hereof
shall inure to the benefit of, and be binding upon, the successors, assigns,
heirs, executors and administrators of e parties hereto.
(e) No delay or omission to exercise any right, power or remedy
accruing to any holder of y Shares upon any breach or default of the Company
under this Agreement shall pair any such right, power or remedy of such holder,
nor shall it be construed to be a waiver of any such breach or default, or an
acquiescence thereof or of any similar breach or default thereafter occurring;
nor shall any waiver of any single breach or default e deemed a waiver of any
other breach or default theretofore or thereafter occurring. Any waiver, permit,
consent or approval of any kind or character on the part of any holder of any
breach or default under this Agreement, or any waiver on the part of any holder
f any provisions or conditions of this Agreement, must be in writing and shall
be effective only to the extent specifically set forth in such writing or as
provided in this Agreement. All remedies, either under this Agreement or by law
or otherwise afforded to any holder, shall be cumulative and not alternative.
(f) Notices deliverable under this Agreement shall be given in
writing, addressed to each arty at its respective address first set forth above
and shall be deemed to have been given either one day after being given to an
express overnight carrier with a reliable system f r tracking delivery; or when
sent by a facsimile promptly and specifically confirmed by telephone, with
another copy sent by express overnight carrier with a reliable system for
tracking delivery.
(g) If any litigation is commenced to enforce any provision of
this Agreement or to seek a declaration of the rights of the parties under this
Agreement or as a result of any breach of any provision of this Agreement, the
prevailing party will be entitled to recover from the non-prevailing party all
of its costs and expenses incurred in connection with such litigation, including
without limitation reasonable attorneys' fees.
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(h) If any provision of this Agreement is declared null, void or
otherwise unenforceable, the provision will be deemed severed from this
Agreement, and the remainder of this Agreement will be enforceable to the
maximum practicable extent.
(i) This Agreement: (a) represents the entire agreement between
the parties with respect to the subject matter hereof and supersedes any
previous or contemporaneous oral or written agreements regarding such subject
matter; and (b) may be amended or modified only by a written instrument signed
by a duly authorized agent of each party.
(j) This Agreement and all questions relating to its validity,
interpretation, performance and enforcement, shall be construed and enforced in
accordance with and governed by the internal laws of the State of Delaware.
(k) This Agreement may be executed in any number of counterparts,
each of which shall be original and all of which shall constitute together one
and the same document.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
day and year first set forth above.
VARSITYBOOKS.COM, INC.
a Delaware corporation
By: /s/ VarsityBooks.com Inc.
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Print Name:
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Title:
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CAMPUS PIPELINE, INC.,
a Utah corporation
By: /s/ Campus Pipeline, Inc.
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Print Name:
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Title:
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Registration Rights Agreement - VarsityBooks.com Inc. and Campus Pipeline Inc.
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